Big boost for garment sector minimum wage, though some see a political motive

Workers walk out of a garment factory yesterday evening in Phnom Penh’s Meanchey district, hours after the Labour Advisory Committee set next year’s minimum wage at $170 a month, the highest increase in the past two years. Hong Menea

Big boost for garment sector minimum wage, though some see a political motive

The government yesterday significantly upped the garment and footwear sector’s minimum wage to $170 a month, from $153, the highest increase in wages in the past two years and one that comes ahead of a crucial national election next July.

The tripartite Labour Advisory Committee – consisting of representatives from the government, unions and employers – went into the meeting with their own wage proposals: $165, $170 and $162, respectively.

The committee selected the government proposal of $165, after which Prime Minister Hun Sen declared a now-customary $5 bump, bringing next year’s wage to $170.

Yesterday’s wage hike was a year-on-year increase of 11 percent, with the minimum wage increasing by less than 10 percent in the two preceding years. Only in 2014, the first year of the tripartite negotiations, did wages increase more, rising 28 percent following the nationwide wage protests of 2013.

Sam Heng also said that the government would try to pass as soon as possible a contentious universal minimum wage under which other sectors would start receiving a base wage, but in an incremental fashion. The draft law has been criticised for provisions that would restrict independent research on wages and enact penalties for wage protests.

Ath Thorn, president of the Cambodian Labour Confederation, said yesterday’s increase was warranted given the increases in metrics like inflation and cost of living that go into determining the wage annually, though he was still surprised at the labour committee’s decision.

“As we experienced in previous years, [we] were never able to reach close to $20 or $30 [increases] – at best $5, $8 or $10. So this year, when we get $170 and it is $17 increase, I think it was a good increase, although employers may not be so happy,” he said.

However, Thorn acknowledged that the significant wage increase was likely made with an eye towards next year’s election. The wage hike also coincides with a serious charm offensive by Prime Minister Hun Sen, who has on a weekly basis met with workers and handed out populist promises such as free health care and bus rides, and increased maternity pay.

“Another reason, as I see it, is the politicians are trying to make people happy and attracting people to vote for them,” Thorn said.

Miguel Chanco, lead Asean analyst at the Economist Intelligence Unit, said a wage hike that exactly matched the unions’ demands came as no surprise to him, given the proximity to next year’s election.

“Hun Sen and his government will be able to score some political points by claiming that the prime minister’s intervention brought the rate exactly to where the unions wanted it, at US$170 per month,” he said via email.

However, the popular move could backfire on the economic front given that it was not based on sound policies, he added, equating it with the government’s surprise move to cap interest rates for microfinance institutions earlier this year.

“Cambodia’s policymakers are playing a dangerous game. The CPP’s short-term political lens is clashing with the need for sound economic policy.”

While Ken Loo, Secretary General of the Garment Manufacturers Association in Cambodia, said the wage hike was “huge”, he said the prime minister and government had provided them with some concessions.

These were a complete slashing of the export management fee and a five-year delay in the implementation of a 1 percent advance profit tax implementation – demands made to the government in a letter on Wednesday – which Loo said would provide some cushion to the sector.

“Sure it has cushioned us a little bit but we will need to cooperate with the workers to have more gains in productivity,” he said.

Kheang Sreylea, a garment worker from Shen Zhou (Cambodia) factory in Phnom Penh, could see no fault with the increase, admitting it was actually better than she would have thought.

“It’s higher than my expectations. I thought it would be only $160. I think it’s a good increase,” Sreylea said.

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